WASHINGTON (Dow Jones)–U.S. Treasury Secretary Timothy Geithner on Wednesday signed an updated taxation treaty with the Swiss government, a move the U.S. hopes will help it combat offshore tax evasion by U.S. citizens.

The treaty, signed by Geithner and Switzerland Ambassador Urs Ziswiler, provides the U.S. Internal Revenue Service with greater access to information on U.S. account holders at Swiss banks. However, the U.S. must be able to clearly identify the suspected account holder, along with the Swiss bank, according to details the Swiss Finance Ministry released earlier this week.

Another new provision in the treaty would ensure that U.S. holders of individual retirement accounts that include Swiss companies in their portfolio won’t be taxed until the income from that account is distributed. A Treasury official said pension funds are already exempt from withholding taxes, and the revised treaty would extend that treatment to IRAs.

The treaty, effective from Wednesday, is still subject to a lengthy ratification process that includes a review by parliament and interest groups such as business associations. It must also be ratified by the U.S. Senate.

The U.S. pact effectively represents Switzerland’s 11th such agreement, and, together with a 12th with an undisclosed country expected to be signed Thursday, means the alpine nation is close to being removed from a grey list drawn up by the Organization for Economic Cooperation and Development, or OECD.

Earlier this year, Switzerland was included on the OECD’s grey list of countries, such as Austria, Chile and Singapore, that hadn’t yet implemented a key article of the OECD Model Tax Convention aimed at combating tax evasion. In the wake of the financial crisis, increasingly indebted governments have come down harder on tax evaders and the lack of financial transparency associated with tax havens.

He later added that the agreement “strengthens our longstanding relationship with Switzerland and will help serve as an example for others around the world.”

The treaty revisions were negotiated in the midst of a legal battle over the identities of UBS AG (UBS) clients who are suspected of evading U.S. taxes through secret Swiss accounts.

The U.S. has been trying to pierce the veil of Swiss banking secrecy to get the identities of U.S. tax cheats who used Swiss accounts to dodge taxes. In a settlement agreement reached in August, UBS, with the blessing of the Swiss government, agreed to provide the IRS with names of roughly 4,450 of its American clients.

The IRS was initially seeking access to data on more than 50,000 UBS clients.

Geithner said the revised treaty will help resolve disputes between U.S. and Swiss tax authorities by “providing binding mandatory arbitration in cases where tax authorities have been unable to find a resolution after a reasonable period of time.”

With world leaders convening in Pittsburgh for the G20 summit, Geithner plans to highlight the progress being made, with hopes of “building on this progress in the coming months and years,” he said.

The new U.S.-Swiss treaty is based on model language from the OECD, which some transparency advocates criticize as too lenient on secrecy jurisdictions.

Heather Lowe, Legal Counsel at advocacy group Global Financial Integrity, said the treaty still stipulates that very specific information on suspected tax evaders be provided by the country requesting information. And it explicitly states that the agreement doesn’t commit the parties to automatically or spontaneously turn over information.

But Lowe said the agreement makes progress on preventing Switzerland from falling back on its national laws – under which tax evasion is not a crime – to shield information. It includes a clause, not found in the OECD language, stating that authorities shall have power to enforce disclosure of information required by the treaty “notwithstanding…any contrary provisions in its domestic laws.”

Despite the symbolic importance for Switzerland, some observers questioned how much the strengthened agreement will add to the ability of the U.S. to catch tax evaders.

“In light of the UBS settlement, the treaty is almost superfluous,” said Asher Rubinstein, a partner in the law firm of Rubinstein & Rubinstein.

While the treaty requires the U.S. to provide specific information about suspected tax evaders in information requests, a John Doe summons can be used by the Justice Department without any information on individuals. “The U.S. doesn’t need the treaty if it can just issue another John Doe summons,” Rubinstein said.